‘Telkom can slash ADSL prices by over 50%’

[Puento]

Telkom has lots of room to reduce the cost of ADSL – both access costs and IPC wholesale charges: industry expert

Telkom’s high ADSL costs have been a bone of contention since the service was launched in 2002, with both ADSL access charges (aka ADSL line rental) and Telkom Internet's ISP fees coming under fire.

In recent years, general ADSL ISP charges have plummeted, mainly as a consequence of Internet Service Providers (ISPs) using Telkom’s IPC wholesale ADSL service to build their own ADSL data services to offer to the market.

With capped ADSL pricing of under R30 per GB and the introduction of affordable uncapped ADSL accounts by MWEB in March 2010, many consumers feel that ISP pricing levels have reached acceptable levels, but ADSL access prices remain prohibitive.

Telkom’s ADSL access charges have remained unchanged since 2007 despite significant growth in the South African ADSL market. Considering that all ADSL subscribers are forced to also purchase an analogue phone line from Telkom, the cost of an ADSL line alone is now higher than an uncapped ADSL account.

However, ADSL access and ADSL line rental are not the only costs which directly go to Telkom. Telkom also makes money on data/bandwidth sold to an ISP’s clients through their wholesale IPC charges, which means that Telkom continues to rake in a large portion of all ADSL charges independent of whether you use MWEB, Afrihost, Web Africa, Axxess or Cybersmart as a service provider.

Time to drop ADSL prices

According to Andre Joubert, GM of MWEB Business, it is high time that Telkom reduced both its ADSL access costs and IPC charges.

Joubert says that Telkom should be able to easily slash the cost of ADSL access by 50% or more and still maintain a healthy margin on the service. The same should happen with wholesale ADSL IPC prices, said Joubert.

The MWEB Business GM pointed out that they have seen no real price reduction in IPC costs despite the fact that numerous ISPs started making use of the service in recent years.

Joubert said that economies of scale should mean that Telkom has a lot of room to manoeuvre when it comes to wholesale ADSL prices, and that he hopes that Telkom does not keep prices artificially high because of their monopoly in the local ADSL market.

According to Joubert, Telkom’s decision to not drop ADSL prices is closely linked to a lack of competition in the fixed line broadband market, partly caused by Neotel’s decision to offer wireless CDMA-based broadband services rather than fixed line offerings like fibre-to-the-home (FTTH).

“Neotel’s inability to compete against Telkom means that Telkom has no pressure in the ADSL market,” said Joubert.

Local Loop Unbundling (LLU) may bring more competition to the ADSL market if implemented correctly, but with Telkom apparently pushing for an initial bit-stream solution as a first step to full LLU it may take a lot of time to see the real benefits of this intervention.

source

[-Prometheus-]

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[Sojourn]

Sickening that our hopes set on Neotel came to nothing.

[JollyJamma]

There's a group pushing for the complete sale of all ANC owned Telkom shares. Only then will it be easier to implement.